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The future of positive impact Finance is yours to craft

13/11/2018

Sustainability and Positive Impact is of acute importance worldwide.

It is not a new topic within banks, it has been a trend for the past two decades where banks like Societe Generale have started taking into account the environmental and social dimensions in their business.

Today, I believe there are two important factors that push us, collectively, to accelerate our involvement: urgency and awareness.

URGENCY

Urgency because the challenges that we will have to face due to climate change, migration and population growth are huge and could lead to significant crisis if we do not take immediate measures.

For instance, according to the World Bank, the worsening impacts of climate change in three densely populated regions of the world (Sub-Saharan Africa, South Asia, and Latin America) could see over 140 million people move by 2050, creating a looming human crisis and threatening the development process.

The growing number of disasters and conflicts linked to future climate change could push the numbers even higher unless urgent action is taken.

AWARENESS

The good news is governments, state bodies and public opinions are increasingly aware of this situation and have started to realize that climate change could ultimately lead to a major security issue in several parts of the world.

Beyond the Equator Principles created in 2003, much more has been done and foundations for stronger actions have been laid: from the Kyoto Protocol, to the historical 2015 Paris Climate Change agreement which demonstrated that international climate change agreements can bring the countries of the world together to address a global problem, including the key goal to limit the global warming below 2 Celsius degrees.

A great number of initiatives have now been launched by many institutions and stakeholders. To name a few: the G20 (Green Finance Study Group), the Paris Financial Market Place (The Paris Green and Sustainable Finance Initiative, launched in 2016), the European Union (Sustainable Finance Initiative), and last but not least the United Nations.

SDGs AND POSITIVE IMPACT FINANCE

In September 2015, the United Nations General Assembly formally established 17 Sustainable Development Goals (SDGs), providing a framework for public and private stakeholders - governments, civil society and businesses – to be addressed by 2030. This framework is extremely important and will help stakeholders to set their agendas and define their policies over the next 15 years.

Sustainable Development Goals go from the fight against poverty and hunger to the development of clean water and sanitation projects, climate actions, access to affordable and clean energy, quality education etc.

An estimated $5-7 trillion a year until 2030 are needed to realize the SDGs worldwide, including investments into infrastructure, clean energy, water, sanitation and agriculture. This amount is gigantic!

Blended finance, venture capital, impact investing, crowdfunding and environmentally oriented market instruments such as Green Bonds are among a range of mechanisms designed to bridge the gap, but none of the current approaches seem sufficient to reach the necessary scale.

While the urgency of meeting this challenge is becoming more and more critical, making the connection between needs, business models and funds remain difficult. This is why the UN Environment Finance Initiative released the Positive Impact Manifesto calling for a new financing paradigm: bridging the funding gap for sustainable development. The attainment of the SDGs requires a new, impact-based approach, based on a holistic consideration of the 3 pillars of sustainable development: environment, social, economic.

HOW CAN THE FINANCIAL COMMUNITY CONTRIBUTE TO THIS CHALLENGE?

The financial community is at the heart of an essential shift to more sustainable development. And Societe Generale is a pioneer of banking’s response. Our long-term vision is that we are committed to the positive transformations of our societies and economies. This is why we have built our 2016-2020 Transform to Grow strategic plan fully integrating our Corporate & Social Responsibility (CSR) commitments into our business development.

It is also through the Group’s geographic footprint in all the countries where we operate, the diversity of our businesses and our commitments to responsible banking, that Societe Generale contributes to meeting the United Nations’ SDGs.

Still, a bank can have a much broader reach: through its business activities, by supporting its clients in this process, whether they be corporates or investors. 

In Societe Generale, we have 3 areas of focus:

First, by contributing to the energy transition in a pragmatic way. One important component of this contribution is the development of Renewable project finance, which is essential for a bank like Societe Generale, a leader in the energy sector.

We have set ambitious 2020 objectives to finance this transition by raising €100 billion. We already have reached over 50% of that figure, as of today. This €100 billion includes a contribution of approximately €15 billion to the renewable sector as well as direct or codirect Green Bond issues for a nominal amount of €85 billion on the same period. On renewables, I am happy to say we have already reached this figure in less than 2 years and we are committed to do more. As for green bonds, we have continuously accompanied our clients in the sustainable bond market. Since 2016, we have lead managed over 50 green, social and sustainability bonds to a total exceeding €46 billion equivalent.

Second, by structuring new sustainable and positive impact products and services for our clients. In fact, we have developed in-depth environmental and social expertise across our business-to-business offerings, to help our clients make the deep transformation to tomorrow’s world. We have done so across finance’s value chain, from research and advisory, to capital markets as well as investor products and services.

Last, by developing a positive impact finance approach through United Nations Environment Programme - Finance Initiative (UNEP FI). We believe that integrating positive impact criteria in financing and investment solutions generates long-term outperformance for all stakeholders and ultimately will contribute to bridge the funding gap identified by the UN.

This is why we are part of the UNEP “Positive Impact Finance Initiative” as founding member. UNEP FI aims at creating an enabling environment for financial institutions to embed sustainable development policies into their operations.

Importantly, the UNEP-FI has developed a dedicated set of principles for Positive Impact Finance to guide financiers and investors in their efforts to increase their positive impact on the economy, the society, the environment, constitutes a central component of this initiative.

There are 4 main principles:

  1. Definition:  delivering a positive contribution to one or more of the 3 pillars means that any potential negative impacts to any of the pillars have been duly identified and mitigated.
  2. Frameworks: adequate processes, methodologies and tools to identify and monitor the impact of the activities, projects to be financed, or entities to be invested in.
  3. Transparency: transparency and disclosure should be provided.
  4. Assessment: the assessment of Positive Impact Finance delivered by entities should be based on the actual impacts achieved.
     

These principles promoted by the UNEP FI are spreading fast around the world among the financial community.

THE FUTURE IS YOU

And the business potential is huge because all organizations around the world will have to address positive impact.

We believe that it is all individuals, entrepreneurs, business leaders who will develop concrete solutions for a more inclusive and sustainable world. It is you, who will contribute to this audacious challenge and our cross-expertise teams are mobilized to leverage your ambitions.